Monday, September 30, 2013

I am getting a lot of responses, (some genuinely
understanding, some aggressive and unpleasant) from readers who assert that I
have misunderstood the criminogenic nature of the City of London and its norms.

All too often, the writers assume as a matter of course
that profitability, is an admirable status, however it is achieved.

My point has always been that if that is true (and it is
an assertion I do not promote), then how does one define what is right and what
is wrong within a financial market? And if that cannot be achieved
satisfactorily, then how do we assert the same for society as a whole?

There are a number of words and phrases that are
routinely trotted out to assert the legitimacy and the genius of the financial
sector; innovation, entrepreneurship, profit-centered, revenue-focused, et al.

Politicians and free-market apologists constantly assert
the importance of these contexts, and it seems that increasingly, particularly
in recent years, their encouragement and enhancement has become the sine qua
non of the financial climate in which we have been living.

It presumes that all can be forgiven in the pursuit of
profit.

While this may be an admirable, unfettered free-market sentiment,
it does not accord with reality.

The idea that a market can be permitted to operate
without controls or accepted norms, (which apply to everyone) is a fairly
recent phenomenon, and one which needs some deconstruction.

Nevertheless, it is a status which has applied itself
most rigorously to the operation of our free market economy in recent years,
culminating in the ultimate collapse of banking system as we had come to know
it, the almost total melt-down of our financial system, and a state of affairs
from which we are only now beginning to wonder whether there is any possible
light at the end of the tunnel!

There is no other way to describe the criminal business
conduct that has identified the retail banking system in recent years. We have
only to look at the dishonest conduct undertaken by banks in the criminal
defrauding of their clients in the PPI scandals, or the interest-rate swaps
episodes.

I refuse to use the conventional accepted shibboleths
(mis-selling) because that phrase deliberately masks and re-determines what was
by any other means, a policy of organised criminality.

We only have to observe the unconditional refusal by the
banks to implement the anti-money laundering regulations to their fullest
degree to understand that the financial sector puts profit above all else.

We only have to consider the way in which the banks have
routinely flouted, distorted and manipulated the LIBOR market rules, or
deliberately manipulated other market standards in order to make profits for
the few, at the expense of the many, to realise that criminal behaviour is
rampant in these markets.

Yet no-one is willing or seems able to talk about
ordinary criminality when profits are to be made!

Even when I submitted evidence to the Banking Commission
and talked about organised criminality within the banking sector, no-one knew
how to debate this phenomenon!

Whenever there is established evidence which demonstrates
that downright criminality is being carried out, the City Establishment draws
its wagons into a circle and routinely denies the assertion, trotting out the
usual bromides about '...a few rotten apples...' et al!

These senior
Establishment figures have all been earning huge sums of money by way of
bonuses, dividends and pension contributions as a result of the criminal proceeds,
did no-one even once stop to ask where all this money was coming from?

The fact is that no-one did, because no-one wanted to,
because to do so would have been to acknowledge the ghastly and unpalatable
truth that the profits being earned were in some way being earned dishonestly.

So, the City and its habituees have a very clever way of
nullifying the impact of this recognition.

They adapt the use of what criminologists call
'techniques of neutralisation', which can be defined as "...a theoretical series of methods by which
those who commit illegitimate acts temporarily neutralize certain values within
themselves which would normally prohibit them from carrying out such acts, such
as morality, obligation to abide by the law, and so on.

In simpler terms, it is a
psychological method for people to turn off 'inner protests' when they do, or
are about to do something they themselves perceive as wrong..."

This concept was first formulated by
David Matzaand Gresham Sykes while they were working on Edwin
Sutherland's theories of 'Differential Association'in the 1950s.

While working on juvenile
criminality, they theorised that the same techniques could be found
throughout society and published their ideas as long ago as 1964 in a book
called 'Delinquency and Drift'.

Their theory states that '...people are always aware of their moral obligationto abide by the law, and that they
have the same moral obligation within themselves to avoid illegitimate acts...'

Thus, they reasoned, when a person did commit illegitimate acts,
they must employ some sort of mechanism to silence the urge to follow these
moral obligations.

They were able to explain how offenders 'drift' from illegitimate
to legitimate lifestyles repeatedly, as they retain the moral code, rather than
wipe it clean.

Such a phenomenon can be seen repeatedly within the lifestyle and
the culture of the City practitioner.

Bankers and other financial elite members will make significant
use of conduct norms that suggest high standards of conventional behaviour, and
which give all the impression of conforming to an established set of
behavioural standards.

Thus they will contribute to funds and collections designed to
retain art-works for the nation; they will become regular attendees at the
Royal Opera House, they will contribute to established charities, they will
sponsor important sporting events and fund sporting teams; they will look and
sound exactly as they believe the ordinary public would want to see them
behave, if they wish to benefit from the high status that such compliance would
be considered to bestow upon them.

In so doing, they will seek to attract a veneer of sophistication
which they believe is demanded of their position within the financial sphere.

At the same time however, they will conduct their businesses in a
way which is little short of blatant organised crime. However, they themselves
are so far removed from the activities of those who business it is to bring in
the money on which their businesses rely, that they are able to maintain an air
of self-righteous denial, whenever it is suggested that they too are tarred
with the same brush as the lower orders who are carrying out the criminal
activities.

But it has been ever thus.

Over many years, the City of London has built up a very
sophisticated and extremely clever method of providing itself with the
wherewithal to maintain a high standard of income and reward, safe from the
prying eyes of hoi polloi or anyone who would wish to challenge their hegemony.

I used to work for a big commercial law firm within the Square
Mile. I managed a practice which was designed to offer compliance advice to
commercial businesses to ensure that they operated inside the financial regulations
defined by Parliament.

One day, I was approached by a huge financial services company who
wished to seek my advice on an aspect of the new anti-money laundering
regulations. The lawyer who rang me made it perfectly clear he wanted to do
business straight away with me, he said ' the clock is ticking', meaning we
were on the record right away.

He wanted me to give him some advice about the nature of a
particular insurance policy which his firm dealt in daily, selling them to all
and sundry. He wanted me to advise him that this particular kind of contract
did not need certain regulatory requirements to be undertaken when it was sold.
If I had agreed with him , his firm would have saved themselves a fortune in
client identification costs, and continued to make another fortune selling
these policies!

However, the question he was asking was so patently ridiculous,
and the answer demanded so obviously improper, that it only took me a few
minutes to explain to him why he was wrong and his request could not be acceded
to.

He continued to badger me for about 6 weeks, trying different
computations along the 'what if' scenario ploy! At every stage, I reverted to
my original answer and told him that in my opinion, he was wrong, and he should
stop wasting his money and my time.

In the end, he backed off, but then refused to pay my (very
modest) account.

I raised it with one of my principals, who just laughed and said;

"...You should have told him what he wanted to hear in the
first place, charged him a huge fee, which he would have paid gladly, and
forgotten you ever heard of him..."

"...But what he wanted was completely illegal..." I
said, "...and if I had so advised him, his firm would have been acting
unlawfully and making a huge sum of money illicitly...and we would have been
guilty of negligence"

"...Yes..." came the reply, "...but why do you
care..?"

"...Because it would have been my advice that was bad, and I
pride myself on knowing the law and giving good advice..."

"...But that's not what he wanted..." came the reply.
"...He consulted you because he thought you would be so over-awed at
winning such a prestigious client, that you would do anything he wanted. Then,
if he got into trouble with the regulator, he would have used our advice as a
defence to any of their charges and blamed your incompetence. The regulator
would have accepted that argument, his firm would have walked away free and you
would be pilloried for being not very skilful! It wouldn't have mattered,
no-one would have cared anyway, your reputation doesn't matter, and you would
have won some valuable client fees. As it is, you have won nothing and now he
won't pay and you have pissed off a potentially important client..!

It was at this point that I started to see the commercial world
through new eyes!

As I continued in the City I observed how the lawyers and the big
accounting firms are there to do whatever the big banks and other financial
entities want them to do, regardless of the rightness of the law. The old
accountant's joke about 'what does 1 and 1 make', and the answer 'it depends
whether you are buying or selling' became less of a giggle and more of a
reality, the longer I worked there!

I watched tax lawyers creating vast structures for foreign tax
cheats who wanted to use the City of London to disguise their tax evasion. I
asked them why it would be illegal to do this for a British client but not a
foreign client? When I pointed out that the new anti-money laundering laws made
such conduct illegal, even for foreign clients they looked at me as if I was
mad. One lawyer in a major City firm went so far as to seek an opinion from
Claire Montgomery QC a leading criminal tax barrister, as to the correctness of
my opinions. He was crestfallen when the learned lady agreed with my views.

I watched and observed while the major banks decided that they
were not going to comply with the provision of the anti-money laundering
regulations. I was invited to discuss the issue at a major City dining club,
but was howled down by a group of senior compliance officers who told me that
they had no intention of engaging with these laws and regulations, despite the
fact that they were ensconced in law, because they were a waste of time, and in
any event, they were not paid to turn good money away from the bank.

So, when I say that I know that the City and its establishment
openly connives at the likelihood that they are breaking the criminal law with
impunity, I do so in the full and certain knowledge that it is happening
blatantly and openly.

My knowledge is confirmed and compounded when I see no criminal
cases being brought for open and deliberate crimes which have been committed by
the banks. No-one was prosecuted at HSBC for cynically laundering money for the
Mexican drug cartels. How was that allowed to happen? No-one was prosecuted for
defrauding customers of billions of pounds worth of PPI contracts. How was that
allowed to happen?

The crimes of the British banking industry have been varied and
many, and all of those who profess the trade of banker (it is not a profession
and never has been), know that much of what they have been doing is illegal,
dishonest and downright criminal. They are all caught up in it, they are all
tainted by it and they all know what has been going on.

Every single one of them is complicit in an industry which has
given crime a whole new dimension.

It is only when the business conduct which the City wishes to
profess can be seen to be transparent and honest that we will be able to rest
assured that the profits being generated are indeed the proceeds of something
other than crime. However, I suspect that the wages of sin are far more
lucrative than any other form of income!

And all the time it remains easier to commit crime within the City
of London because the criminals remain protected by the power of the City
Establishment, the worse things will get, the more de-stabilised the foundation
will become and the more people will be incentivised to break the law. This is
not rocket science, it is an open recognition that until we do something to
stand up to the fraudsters, then the City of London will remain a criminal
sink!

Thursday, September 26, 2013

A few readers have asked me why I am so outspoken in my
criticism of the financial regulators in this country.

I am happy to explain.

I am happy to explain because I have been a Fraud Squad
detective with a string of successful convictions of crooked City practitioners;
a financial regulator with a long track record of turning over dishonest
financiers, and as a lawyer advising financial institutions on the proper way
to comply with financial regulations, while still operating profitably,
although it is true to say that most of my clients wanted me to show them how
to make the money while getting round the law!

I have also written legal text books on the operation of
the anti-money laundering laws; I have published widely on the subject of City
Fraud; and I have taught at Universities and Law Schools on the proper function
of the financial services laws, as well as teaching financial regulation and
global best practice in many countries around the world.

So, I am happy to explain!

The primary function and purpose of a financial regulator
is to ensure that those who seek or who are required to obtain regulated status
to operate in a financial market, are fit and proper to be granted that licence
to operate.

They must always bear in mind that the privilege of
'regulated status' is literally, 'a licence to print money', and it is their
duty to ensure that it doesn't become a 'licence to steal!'

In order to ensure this, they have to provide themselves
with an holistic view of the activities of the market, and they have a duty to
ensure that they employ men and women who have the skills, wit and wisdom to be
able to understand the implications and impose the arcane rules of the
regulatory requirement, while managing their role and function with wit, tact
and good humour!

I believe implicitly in the importance of well-run,
properly regulated, financial services providers, but I believe that any
provider who behaves in the way that all too many banks and financial services
companies have behaved in recent years, belongs behind bars.

I am unrepentant in my well-founded belief that a couple
of decent convictions for fraud, coupled with a selected series of relevant
punishments would do the UK financial services sector a power of good, and
would undermine some of the more pompous, self-serving Chief Executives, who,
pumped up on their own bombast and their arrogance, believe that they are
answerable to no-one, least of all their shareholders. We have had a long
procession of such men in the last few years and they have done their industry
sector nothing but great harm.

Mind you, theirs was not the sole responsibility for the
mess we have found ourselves in, although they bear a significant part of the
blame, no, the politicians went along with the snake-oil and the smoke and
mirrors which the City pumped out. Gordon Brown believed the manipulated
figures so much that he would ritually trot down to the Mansion House dinners
and massage the delicate egos of the Masters of the Universe with massive hyperbole,
all the while spending their elusive profits like a man with no arms!

The Great Financial Crisis was a combination of greed,
hubris and wilful blindness and no contributor, financier, politician or
regulator came out of the event with any credit.

As I have said, I am not worried about making this
assertion, as indeed, I asserted with confidence to the Commission on Banking
that the banking sector in the UK had become synonymous with an organised criminal enterprise.
Perhaps it is not surprising that they made great efforts to suppress my
contribution, and in the end, I had to literally force an admission out of
Andrew Tyrie, the Chair of the Commission that my report had been circulated to
all members of the Commission. I don't know how many contributors have received
a personal letter from the Chairman of the Committee confirming that their
report was considered properly and circulated properly to all members, but I
have one, and that fact alone speaks volumes.

My confidence to make these assertions stems from the
fact that I must be one of the very few people left still operating in this
field who has had the privilege to study at first hand with real and effective
financial regulators, and to have seen just how proper financial regulation
could be carried out.

In 1984, I had the great fortune to be sent by my Police Commander
to the USA to study how the Americans regulated their financial markets. I was very concerned at the time by the
changing nature of the sort of criminal allegations being brought to our door
at the Fraud Squad. Many of them involved investment methods and techniques
which were very alien to our understanding and knowledge, involving new models
of financial activity, particularly in the areas of derivatives and
securitisation.

I was sent to America to observe and report back on US
models of regulatory conduct to see if there were lessons we could learn from
their experience.

I studied first with the Securities and Exchange Commission
(SEC) in Washington, spending nearly a month with these excellent and committed
regulators, before spending a similar amount of time down the street with the
Commodity Futures Trading Commission (CFTC). I also spent time with the Self
Regulating Organisations, before spending time with the regulatory divisions
inside the various financial exchanges in Chicago, Philadelphia and New York.

At first, the Americans were bemused by the presence of a
'Scotland Yard Cop' in their midst, because in the US, the roles I and my
colleagues in London played were largely not undertaken by detectives, but were
left to the respective regulatory agencies, or the FBI in conjunction with the
Justice Department.

However, they were very kind and forthcoming and they
taught me a great deal about the regulatory process as it was then practised in
the United States in 1984. Remember, this was before the days when Regan,
Clinton and G.W.Bush conducted their de-regulatory spree, driving whole swathes
through the US process, and pulling the teeth of the finest regulatory agency
in American history.

I learned that the agencies hired men and women with good
business, legal and accounting skills, and then trained them to become
dedicated regulators. This was not as difficult as it might at first sound
because the kind of people who sought jobs with these agencies at that time,
were keen and enthusiastic and had benefited from the 'American Dream', which
had seen hundreds of thousands of ordinary working-class kids from all across America,
who had grown up in the post-depression financial climate. but who had all
managed to get a college education, thanks to the financial stability and the
broad-based financial prosperity which had been ushered in by the
post-depression financial and business reforms in Roosevelt's 'New Deal Era'.

The New Deal ensured that the US financial markets, which
had been undermined and ultimately destroyed by rampant greed and criminality
in the early 1920s, were enabled to be re-built by men and women who understood
that good and effective regulation can ensure that the financial markets can
thrive and prosper when regulated properly, ensuring that crooks and wise-guys,
who would otherwise congregate there, were not allowed to flourish. Not everyone who works in the financial sector
is a decent and honourable practitioner, a large number of them have strong
criminogenic tendencies, and accepting
this fact is an important step in providing a strong regulatory environment.

This recognition meant going after those who would damage
the reputation of the markets, and who would seek to acquire an unfair
advantage through their dishonest conduct. It meant that the US was able to
build an economy which underpinned a financial stability for a wide
cross-section of working people; enabled America to win the Second World War
and fund the re-emergence of a shattered Europe from its post-war depression;
and ensure the financial and social stability which would provide a new
generation of Americans with sufficient means to enjoy a secure economic
lifestyle.

These young people understood the vital importance of a
well-regulated economy and were keen to take their part in maintaining the
effectiveness and efficiency of their markets, realising and recognising the
importance of such controls. They were keen and willing to go after those
crooks and wide-boys who would threaten the smooth-running of these systems,
and so they were hugely motivated to undertake strong enforcement measures
against rule-breakers. In addition, their careers would benefit from being seen
to be dynamic and hungry for successful convictions and regulatory findings,
and there was significant competition between the young staffers to bring home
big cases!

The long-term outcome of this environment was that crooks
and wise-guys knew that they would be prosecuted and legally challenged at
every turn by men and women who were keen to chase them out of the market. They
knew that none of them were too big to be prosecuted, that none of them were
beyond the reach of the Justice Department, and that every effort would be made
to hunt them down. This recognition saw the successful prosecutions of Dennis
Levene, Ivan Boesky and Michael Milken for one of the biggest insider dealing
and market manipulation episodes in the market's history, and all three men
went to jail.

When I left America to return to the UK, I was encouraged
by my US friends to put my new skills and knowledge to better use in the new
regulatory climate which the British Government purported to be introducing
through the regulatory changes being undertaken in 1986.

My biggest mistake was ever to believe that such a
regulatory programme could be effectively introduced in the UK. It was naive of
me then to suppose that the British would ever introduce any form of regulatory
regime which would even begin to match that governed by the US model, yet I
came home full of hope that such a structure could be successfully imposed.

I was so wrong!

What I had not then fully understood was just how
powerful the City of London, as an independent and hegemonic institution was. I
had not fully appreciated just how much the City would do to undermine and
emasculate the best intentions of the Government proposals in the Financial
Services Bill. I had not fully thought through the implications of the relationship
the City has with the organs of Government, and just how much the UK is
dependent on the City being willing to continue to pay a form of 'Danegeld' in
order to be able to continue operate unmolested. What I had not fully
understood was that Government only has a very limited degree of control over
the activities of the Square Mile, and what the City fathers do not want to do,
they simply will not do, and no Government agency will force them to comply!

This is why, for example, the anti-money laundering laws
are generally not enforced as far as the big institutions are concerned. The
regulators keep pointing out control weaknesses, in report after report, and
the institutions continue to ignore them, secure in the knowledge that the
regulators will not take them to task too closely.

What we have inherited is a bastardised remnant of what
originally started out with such good intentions. Successive governments originally
staffed the new lead regulator with the usual detritus of failed Government
departments such as the Department of Trade and Industry (DTI), thus ensuring
that the failed regime of earlier control which the new regime replaced was
staffed with the same failed staffers who would otherwise have been out of work.
The same policy has been observed most recently in the move from the FSA to the
FCA!

I have seen how markets can be regulated by good men and
women with fire in their souls, who really want to ensure that their markets
are clean from the criminal activities of those who would undermine their
effectiveness. I know just how powerful the bringing of criminal action is
against those who truly deserve it, and I am aware of how the threat of
criminal action will make practitioners think twice before they take the wrong
road.

We have recently experienced an era of organised
criminality in our financial and banking sector which stretches our capacity
for credulity to the limit. I simply cannot comprehend how so many of these
organised criminals have been allowed to get away with their dishonesty and
no-one has done anything about it. The lead regulator has stood by and watched
while major criminality has been carried out in world markets, and all they
have done is to impose agreed fines, whose only impact is upon the hapless
shareholders.

Our major banks have become a by-word for sharp practice,
and their criminal excesses should have caused a tsunami of prosecutions and
convictions. The fact that our regulators have failed to grasp this nettle and
deal with these criminals properly is a cause for great regret, but the
agencies themselves are simply not staffed with men and women of the right
calibre, skills or degree of moral fibre which their predecessors at the SEC
and the CFTC possessed.

It has now become fashionable to assert that financial
regulation can be carried out in a hands-off way, and that fining banks is an
effective way of dealing with them.

This is complete and utter nonsense!

In order to get any kind of compliance, we need to
demonstrate to the banks that we have the stronger hand than they do, and we
need to be prosecuting most of the worst offenders. The City of London needs to
be brought to heel. We want them to be effective and efficient, but they cannot
be allowed to carry on running a quasi-autonomous criminal jurisdiction in the
way they have been allowed to succeed for so long!

It is the only way that the public will finally get back
the confidence that something is finally being done about these organised
mafias who have been allowed to run our banks for so long.

Tuesday, September 24, 2013

The UK financial regulatory agencies are
failing in their public duties to protect the investing public and they are
engaging in actions which are making the impact of the banking scandals far worse
than they need be.

I am grateful to my friend Carol (she knows who
she is and why I am thanking her) for permission to refer to a letter she has
written to a number of very important and influential City figures regarding
the reasons why the relevant authorities refuse to publicly discuss the details
surrounding a number of criminal activities committed by major UK banks,
quoting as a reason for refusal, ''the need to protect the commercial interests
of regulated firms!"

As Carol is asking (quite reasonably) for
details of these criminal activities for which the firms have been disciplined,
to be made known publicly, it does seem worrying that wholesale criminal acts
can be described as 'commercial interests', but there you have it.

Carol makes a very interesting and valid
observation.

If you read the blurb which surrounds the
mission statements of the financial regulators you will see that great emphasis
is placed on trust. The FCA's website trumpets;

"...We want consumers to use financial
services with confidence and have products that meet their needs, from firms
and individuals they can trust..."

One of the key elements in ensuring that trust
is the need to maintain full transparency when the institution concerned breaks
the rules.

If my bank is guilty of breaking the law or the
relevant rules of conduct, I want to know, and what is more I want to know the
full details. I want to know all the gory facts, and I want to know the
identity of who failed to comply properly, and I want to know on whose watch the
relevant wrong-doing occurred, and why it happened.

Without this knowledge, how can I ever trust my
banks and its managers, and more importantly, how can I be assured that such
conduct will not happen again! What is more, I want to be able to lobby my CEO
and demand that relevant wrong-doing be handled appropriately. I want evidence
and data, I want to be informed, I want ammunition to throw at the well-heeled
Board members as they trouser their next rise in emoluments, and I want action!

All too often, the regulators are conniving in
secret dealings, in regulatory processes, from which little if any information
is allowed out into the public domain, and so we, the investing public never
get to know just how bad the situation has been inside the institutions in
which we are expected to risk our capital. And that, I assert, is a corrupting
activity!

Today, in the Daily Telegraph I read that
Barclays Bank, (one of the most egregious of all the big players) has admitted
that '...it was likely to suffer a £50 million fine for the handling of its
Qatari bail out...'

Ok, that's alright then! Another hefty fine for
Barclays bank, another drain on the pockets and goodwill of the shareholders,
another public shaming for one of the leading criminal banks! Why on earth
should we have any faith in this bunch of scoundrels, why should any of us
believe that this gang of poltroons could organise a picnic for the Bullingdon
Club?

And why are they being fined £50 million?

Well, you see, there's the rub, because none of
us are being told.

Barclays said on Tuesday it was contesting the
preliminary findings of a British regulatory probe into its commercial
agreements with Qatari investors who led a rescue fundraising of the bank
during the 2008 financial crisis. Neither Barclays nor the Financial Conduct
Authority (FCA) disclosed what the preliminary findings were. But the bank said
it received them on June 27 and contested them five days ago.

If we don't know what they are, how can we make
informed judgements on the rightness of the case against the bank, or the effectiveness
of the regulators? Both sides in this debate are protected by this wall of
silence, while we, the people whose funds are at greatest risk are treated like
mushrooms.

This is all very convenient, because it means effectively
that banks can engage in any amount of wrong-doing, until such time as they are
discovered, and then, they can offer to settle for a discounted penalty rather
than contest the issue. This policy of discounted penalties (which is the only
thing the banks care or are looking for), means that the whole regulatory
process has devolved into farce. The banks know that no-one on the management
floor is going to prison for any amount of criminal wrong-doing, so it is
merely a question of getting out from under at the cheapest price possible. It
makes breaking the law all the more worthwhile.

The FCA and Britain's Serious Fraud Office
(SFO) have been investigating for about a year the circumstances surrounding
the Qatari cash injection secured by Barclays, which is struggling to restore
its reputation after a string of scandals.

Qatar Holding invested 5.3 billion pounds ($8
billion) in Barclays in June and October 2008, helping it avoid a government
bailout and associated stringent re-payment terms and conditions imposed on
bailed-out rivals Lloyds Banking Group and Royal Bank of Scotland.

Hence, apparently the reports that Barclays has
revealed it is facing a £50 million fine over claims it acted "recklessly"
in its multibillion-pound bailouts from Qatar in 2008.

The Financial Conduct Authority (FCA) accused
it of agreeing £322 million of secret payments to Middle Eastern investors to
secure their support for cash calls totalling more than £5 billion at the
height of the financial crisis.

For 'secret payment' you can read 'sweeteners'
or 'backsheesh' or an old fashioned 'bung', the kind of behaviour which is a
sine qua none when you deal with any Middle Eastern potentate, Crown Prince or
loblolly man! In more modern parlance, the practice might be construed as being
an alleged corrupt payment, and this is why no doubt the SFO has been
investigating. However, the SFO has a track record of not going through with alleged
bribery investigations when it comes to the denizens of the sandy quarter, so
maybe we shouldn't be holding our breath too long or hard!

Barclays, which contests the FCA's findings,
said the fees relate to advisory services over five years. It is being probed
by the Serious Fraud Office and regulators in the US, and admitted it does not
know how much the final cost will be. Barclays was warned about the potential
fine on Friday and told shareholders today in a prospectus document for a
rights issue that will tap investors for another £5.8 billion to plug a £12.8
billion hole in its finances.

The FCA ruling follows its £290 million penalty
last year for rigging the Libor interbank lending rate.

Barclays said the FCA's warning notices state
that the main purpose of the agreements was "not to obtain advisory
services but to make additional payments, which would not be disclosed, for the
Qatari participation in the capital raisings".

Barclays is alleged to have broken listing
rules which impel it to disclose information and "act with integrity"
to shareholders.

Quite frankly, this kind of alleged behaviour
is what we had come to expect from the bank run by the former Capo di Tutti
Capi, Sr Roberto Diamante. Under his less than benign regime, as we now know,
the rule-book was shredded, the only rule remaining was make as much money as
possible by whatever means going!

The bank turned to Qatari investors in 2008,
helping it avoid the same fate as Royal Bank of Scotland and Lloyds, which were
bailed out by the taxpayer. It may be mere sophistry to observe that Barclays
may have been forced to this proposal to avoid having their books and records
too closely exposed to public scrutiny, in case the public purse had been
called upon to stand them up.

It entered "advisory services
agreements" with the Qataris in June and October 2008, but the fees were
not disclosed at the time.

Such words and phrases have been used as a
classic money laundering tactic for many years, and they cover a multitude of
sins, but hey, for a bank that literally wrote the book on criminal banking
methods, why are we surprised!

We can say these things because Barclays bank
has engaged in criminal act after criminal act. The fact that no-one in their
management team has been sent to jail is due to the fact that the banking
sector has the Government by the balls, and applies pressure, any time it looks
like one of the banksters might be looking at risk of a criminal prosecution!

The bank revealed the latest blow as it warned
it remains "cautious" about the trading climate. Barclays also warned
it may not be able to meet the Prudential Regulation Authority's (PRA) demand
that it strengthen its balance sheet by next summer.

The watchdog has ordered it to bolster its
leverage ratio - a key measure of financial strength - to 3% by the end of June
2014.

But Barclays warned it may be unable to meet
these demands - aimed to prevent future taxpayer bank bailouts - if various
fundraising plans are derailed or regulators move the goalposts.

These are the usual flabby threats issued by
these dodgy banks who want to avoid the financial consequences of their
criminogenic conduct in recent years. They resort to a kind of financial
blackmail by threatening the regulators that their requirements are too
onerous, all the time pushing back against the rules designed to make them a
safer place to do business with.

And it gets even better!

The lender warned multi-billion pound provisions
to compensate customers mis-sold products could rise even further. It has set
aside about £4 billion for mis-sold payment protection insurance and £1.5
billion for complex interest rate swaps sold to "non-sophisticated"
small businesses such as bed and breakfasts. But Barclays said the eventual
costs of the scandals could "materially differ".

"Barclays expects further developments in
the near term," it said of the probe, as it announced a 5.8 billion pound
rights issue to plug a capital reserve shortfall.

"Barclays is co-operating with all the
authorities fully. It is not possible to estimate the financial impact upon
Barclays should any adverse findings be made," it added.

The U.S. Department of Justice and the
Securities and Exchange Commission have also opened an inquiry last October
into whether Barclays' third-party relationships, which help it win and retain
business, breach anti-bribery rules.

Barclays said on Tuesday the two US authorities
were also investigating the commercial agreements with Qatar, while the US
Federal Reserve is keen to be kept informed.

The deal with Qatar was controversial from the
outset. Shareholders were angry that Qatar Holding, which is now the bank's
biggest shareholder with a 6.7 percent stake, was offered more attractive terms
than existing investors.

Barclays has also said in other reports that it
would vigorously defend itself against fines worth around $470 million by the
US Federal Energy Regulatory Commission (FERC), which alleges the bank
manipulated electricity markets in and around California from November 2006 to
December 2008.

So, we are back to square one again with
Barclays bank. Frankly, why anyone is willing to open an account with this
bunch of crooks is beyond me.

It used to be said that the biggest
disincentive to regulatory abuse was reputational risk! Will someone please
tell me what reputation Barclays bank has left to hazard? Surely the regulators
can see this? Surely they must realise that all the time they pussy-foot around
agreeing to secrecy deals every time a bank is caught with its pink flabby bits
in the mangle, the bank is just laughing all the way to the discounted fine.
Agreeing to these secret deals is just compounding the felony, and corrupting the process along the way!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!